¶1. (SBU) SUMMARY: Senator and Mrs. Nelson, welcome to the
Philippines! The relationship between the United States and
the Philippines continue to remain strong. U.S. interests in
this major non-NATO ally center on strengthening democracy,
fostering economic growth, fighting terrorism, and providing
superb services to our American and Filipino publics. The
U.S. continues to be the Philippines’ largest trading
partner, the largest investor, and the largest donor of grant
foreign assistance. During your visit, you will meet with
Philippine President Gloria Macapagal Arroyo, be briefed by
Mission Country Team, meet with the head of the National
Intelligence Coordination Agency, and visit with the Joint
Special Operations Task Force-Philippines in Zamboanga. Your
discussions with President Arroyo can reinforce the need to
stay the course on the revived peace process with the Moro
Islamic Liberation Front, while continuing aggressive action
against a few key terrorist targets. The Arroyo
Administration is strongly pro-U.S., and committed to
continued close security, intelligence, and economic ties.
Our entire team looks forward to making your visit productive
and useful.

PHILIPPINE POLITICS
——————-

¶2. (SBU) With less than a year left in office, President
Gloria Macapagal Arroyo continues to balance competing
political interests amidst economic challenges. President
Arroyo has weathered numerous unsuccessful impeachment
efforts and low-level military coup attempts. Her
administration has been plagued by allegations of serious
corruption, as well as charges her supporters are attempting
to juggle the Philippine Constitution to extend legal
protection for Arroyo and her family after her term ends next
year. With national elections scheduled for May 2010, nearly
20 cabinet members have announced their intention to seek
office. Some presumed candidates have attempted to
politicize aspects of our security relationship, such as the
Visiting Forces Agreement (VFA), but none of the likely
presidential contenders would represent a radical departure
from the status quo. President Arroyo met with President
Obama in the Oval Office July 30, and, following additional
meetings with key U.S. cabinet members, returned to Manila
earlier than scheduled due to the August 1 death of former
President Corazon Aquino, a much-beloved icon of democracy.

PHILIPPINES ECONOMIC GROWTH SLOWS
———————————

¶3. (U) The Philippine economy has averaged better than five
percent growth for the past eight years, but under the impact
of the global financial crisis, GDP growth may be outpaced by
the country’s annual 2.04 percent population growth. Should
the global economic downturn be prolonged, the impact on
poverty in the Philippines, where more than 40 percent of the
population lives on less than two dollars per day, could have
a tangible impact on domestic politics. Poverty is
especially severe in the Muslim areas of the southern
Philippines. On the positive side, the Philippine banking
system is relatively sound and not heavily exposed to risks
from current global financial turmoil. The U.S. remains the
Philippines’ largest trading partner, with over USD 17
billion in two-way trade during 2008, and is one of the
largest investors, with USD 6.7 billion in equity.

PROMOTING HUMAN RIGHTS
———————-

¶4. (SBU) President Arroyo continues to express her
commitment to making greater progress on the long-standing
problem of extrajudicial killings, and has taken concrete
steps in this direction. Partly due to increased attention
by the Philippine government, the number of extrajudicial
killings decreased dramatically through 2007 and 2008. While
many execution-style slayings among politicians and others
may be the result of local disputes and long-standing feuds
among rival clans, the government acknowledges the need to do
more to ensure that all such crimes — whether or not linked
to security forces — are fully investigated, and that those
responsible are brought to justice. The Embassy continues to

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press the issue at the highest levels of the Philippine
government, and continues to conduct a comprehensive plan of
public outreach activities, training, and
institution-building to make further progress in addressing
the problem.

SUCCESSFUL COUNTERTERRORISM EFFORTS
———————————–

¶5. (SBU) The Philippines and the United States have scored
important successes on the security cooperation and
counterterrorism fronts. This alliance has resulted in the
death or capture of a dozen key terrorist leaders and over
250 other terrorism suspects in the last three years.
Defense Secretary Teodoro recently emphasized that the
Philippine government achieved success against key high-value
individuals of the Abu Sayyaf Group (ASG) and Jemaah
Islamiyah (JI) terrorist organizations despite persistent
shortfalls in logistical assets. He greatly values the
contributions of U.S. military personnel in improving the
combat capability of Philippine forces. A brazen January
kidnapping on Jolo island by the ASG of three members of the
International Committee of the Red Cross (who subsequently
obtained their freedom) highlights the continuing challenges
that face the Philippine military and police in securing
volatile areas.

PEACE PROCESS
————-

¶6. (SBU) In recent weeks, the Philippine government and
members of the separatist Moro Islamic Liberation Front
(MILF) have established a new ceasefire and taken steps
toward restarting formal peace talks, demonstrating that both
sides share a mutually reinforcing commitment to peace. In
late July, the Philippine government and the MILF agreed to
reinstitute a ceasefire and return to peace talks facilitated
by Malaysia, ending the year of fighting that followed a
Philippine Supreme Court decision in August 2008 that a key
peace deal with the MILF was unconstitutional. The two sides
have pledged to work toward a new framework for engagement
and to aid the return of tens of thousands of internally
displaced persons (IDPs) affected by the conflict. The U.S.
Mission is initiating new programs and reinforcing existing
ones to support the return of IDPs to their homes and their
livelihoods, in cooperation with local Philippine authorities
and military. U.S. support through development assistance
will be an important component of a successful peace process,
for which many are now cautiously optimistic.

STRONG DEFENSE RELATIONSHIP
—————————

¶7. (SBU) Bilateral defense ties remain strong across a range
of key activities, including counterterrorism operations,
disaster relief, and multilateral engagement. Philippine
officials believe continued U.S. military assistance is
essential and that expanded programs could provide greater
improvements in areas ranging from regional security to human
rights. Despite court challenges to the 1998 Visiting Forces
Agreement (VFA) and opposition from leftists to a U.S.
military presence, the Philippine Supreme Court ruled in
February that the VFA is constitutional. During her July 30
Oval Office meeting with President Obama and in a later
separate meeting with Secretary Clinton, President Arroyo
voiced strong support for the VFA and our military
partnership. Agreement was also reached on a memorandum to
increase cooperation against high-seas piracy — a subject of
special interest to the Philippines, given the nation’s
status as home to nearly one-third of the world’s commercial
seamen.

¶8. (SBU) We have a robust military presence in the
Philippines — a Joint U.S. Military Assistance Group
(JUSMAG), Defense Attach Office, and approximately 550 Joint
Special Operations Task Force-Philippines (JSOTF-P)
personnel. Such depth allows us to have offer broad and
far-reaching assistance to the Philippine military. Members
of JSOTF-P work side-by-side with Philippine troops in
Mindanao and the Sulu Archipelago, advising and assisting
them in counterterrorism operations. At the same time, our

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military closely cooperates with U.S. law enforcement and
intelligence agencies to achieve important counterterrorism
successes. In addition to its traditional focus on training
and military sales, JUSMAG is helping the Armed Forces of the
Philippines (AFP) to revise its doctrine to promote ethics
and human rights. The Philippines is an active provider of
peacekeeping troops around the world, contributing to eight
United Nations operations. This year, three Philippine
nominees were accepted to U.S. service academies, one at each
institution.

USAID’S ROLE
————

¶9. (SBU) Since the mid-1990s, USAID has implemented a
sizable and highly effective program throughout the island of
Mindanao and the neighboring Sulu Archipelago provinces of
Basilan, Jolo, and Tawi-Tawi. Approximately two-thirds of
USAID resources for the Philippines have been committed to
these areas, complemented by Department of Defense 1207
funds, JSOTF-P activities, and humanitarian missions such as
the USNS Mercy. USAID-sponsored activities in these areas
include infrastructure development, school computerization,
health and education improvement, environmental management,
former combatant reintegration, and governance. USAID
financed the construction of more than 800 community-level
and over 40 regional-impact infrastructure projects
throughout the conflict-affected communities of the southern
Philippines. The primary objective has been to encourage
economic growth and demonstrate sustained commitment by the
Philippine and U.S. governments to establishing security.
KENNEY